COVID-19 has thrown into sharp relief how many areas of company law compliance depend on simple face-to-face human interactions.
In this environment the Oireachtas has passed the Companies (Miscellaneous Provisions) (Covid-19) Act 2020 (the "Companies Act 2020"), which was commenced on 21st August. The Companies Act 2020 seeks to address many of the practical difficulties encountered by companies trying to comply with legislative requirements which usually require the presence of two or more people in close proximity, from signing and sealing a deed to attending and voting at a general meeting. The Act also seeks to address the financial difficulties facing many companies by facilitating lengthier examinerships and increasing the threshold of debt at which a creditor is able to initiate proceedings to liquidate a company.
Now the Minister for Business, Enterprise and Innovation has made an order commencing the Companies Act 2020, its provisions are in effect and with a few exceptions will only last for the duration of the so-called "interim period." The interim period ends on 31 December 2020 unless extended by the Government. Key features of the Act include:
- Sealing in counterparts: The ability for company directors, secretaries, and their authorised agents to sign and seal separate copies of a contract, instead of having to meet and sign and seal the same page. Signing one copy of an execution page and sealing a separate copy will only be available for the duration of the interim period, but the ability to sign different copies is a permanent change in the law, putting the familiar "counterparts clause" on a statutory footing;
- General meetings and creditors' meetings:
- AGMs which are due to be held this year may be postponed as long as they are held before the end of the year, even where this means that there will be a period of more than 15 months between AGMs. The usual rule that auditors' accounts had to be laid before a general meeting no later than 9 months after financial year end has been adjusted to allow the accounts to be laid before a postponed AGM;
- Where the directors of a company believe that public health advice or government health regulations require them to cancel and reschedule an AGM or EGM, they may now do so at any time up to the day before the meeting is due to be held, or even up to the time that the meeting is due to start, where there are exceptional circumstances,
- Where it is not possible to give notice of a cancelled and rescheduled AGM or EGM in the same manner as notice of the AGM was initially given, the company may instead give notice on its website, by email where possible, and by advertising in a national newspaper;
- AGMs, EGMs and meetings of creditors and contributories may now be held via electronic means regardless of what provisions are in a company's constitution, as long as the company ensures (as far as practicable) that those electronic means are secure and enable attendees to fully participate in the meeting;
- There have been changes to how voting takes place where a general meeting takes place by electronic means:
- A company can include a requirement for all voting at a meeting to take place by poll rather than by show of hands in the notice of the general meeting;
- Voting by show of hands can only be carried out if the chairperson is of the opinion that all members entitled to vote can be identified and that the content of voting instructions can be verified;
- Persons attending a general meeting by electronic means now count towards quorum;
- At a creditors' meeting, members, creditors and contributories can vote either by electronic means or by proxy;
- The notice period for AGMs and EGMs remains 21 days (or 7 days where an EGM is convened to vote on an ordinary resolution only), but where the general meeting is being held electronically the notice provisions now require more details to be included, such as:
- The electronic platform to be used and access details;
- The procedure for asking questions and commenting during the meeting; and
- Any restrictions the company has put in place to identify attendees;
- The procedure to be adopted for voting.
- Similar notice provisions are made for creditors' meetings.
- Whereas previously, public limited companies which allowed for electronic participation in AGMs and EGMs had to guarantee the security of the electronic means, now that standard is reduced to merely providing for the security of those means.
- Withdrawal of dividends: Directors will have the ability to withdraw or amend previous resolutions to pay out dividends where they believe that Covid-19 will have an impact on the affairs of the company;
- Extended examinerships: Where a company is in examinership, the examiner may request longer than the standard 100 days to deliver their report where "exceptional circumstances" have affected the company, up to a total of 150 days;
- Company debts: The threshold at which a company is considered to be unable to pay its debts for the purposes of the Companies Act 2014 is increased to €50,000 of debt which the company is unable to pay on demand to any number of creditors, up from a level of €10,000 in the case of one creditor, or €20,000 in the case of two or more creditors.
Omissions from the law
Although the Act does not deal with the issue of directors' liability should a company go into liquidation, the Office of the Director of Corporate Enforcement (the "ODCE") has issued a statement addressing this point. The statement clarifies that the ODCE will not be quick to impose sanctions on directors where the liquidation of the company is in large part caused by the pandemic, as long as they have acted reasonably and in good faith, which will be some comfort for directors dealing with the new challenges 2020 has brought.
The Seanad debates surrounding the Act indicate that there may be more legislative changes to come, and that there is an appetite to make some of these changes last longer than just the "interim period," especially those around remote access to meetings.
In particular as we enter AGM season, the Act will provide some welcome relief to companies and their officers in a landscape which has changed overnight.
Article written with the assistance of Ryan Connolly.
Originally published August 24, 2020
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.